Staples undone by Q3 miss, warning

SusanLerner

FRAMINGHAM, Mass. (CBS.MW) -- Shares of office products retailer Staples fell more than 5 percent Tuesday after the company fell short of analysts' expectations for the third quarter and warned about the fourth quarter.

The operator of office products superstores
SPLS, -0.20%
posted third quarter earnings of 19 cents a share, two cents shy of the First Call consensus estimate and a penny below last year's third quarter.

Sales for the quarter were $2.8 billion versus $2.4 billion for the year-ago quarter.

The earnings disappointment and warning led Prudential Securities to cut its ratings on Staples to "accumulate" from "strong buy."

For the fourth quarter, Staples said it expects earnings per share for the period to equal or exceed last year's fourth quarter earnings, but fall short of the current First Call consensus estimate, which analysts were placing at 33 cents a share.

Earnings per share in fiscal year 2001 are expected to grow at least 30 percent from fiscal year 2000 levels, according to the company.

Staples said it was "dissatisfied" with the results, which it blamed on the downturn in the economy and its "aggressive" growth plans.

Specifically, Staples said North American retail store results for the third quarter were hurt by lower consumer spending, competitive pricing, labor and shrink pressures, costs associated with the company's new market entries and a new distribution center that is not yet operating at capacity.

In addition, the company's telecommunications subsidiary, Staples Communications, continues to underperform and economic uncertainty caused by the gas crisis in the United Kingdom affected European retail results, the company said.

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